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Employment and Social Developments in Europe 2014
Table 7: Example of studies on scarring effects on other outcomes While over-education may also at some
point act as a strong negative signal to
Paper Main results employers, Baert and Verhaest (2014)
Bell and Blanchflower (2011) Young people's health status, well- provide evidence (based on a field
being and job satisfaction are experiment in Belgium with fictitious
impacted negatively through spells of job applications to real vacancies) of
unemployment, although the effects are a large stigma effect of unemploy-
less serious for 'older young people', i.e. ment than over-education and argue
those aged 23 or more. in favour of fast activation of unem-
Cutler et al (2014) Review of literature documenting that ployed youth.
cohorts graduating in bad times have
lower wages and poorer health for many Education protects
years after graduation, compared to those from scarring effects
graduating in good times.
Brenner (2013) Drawing on the 2000–10 period in In their review of existing studies
EU countries, the paper examines the in European countries, Scarpetta et
relationship between the unemployment al (2010) point out that ‘the lower
rate and Ischemic Heart Disease (IHD) the level of initial qualification, the
mortality rates and concludes that the longer the scarring effects are likely
unemployment rate has been an important to last’. This finding is confirmed by
risk factor for IHD mortality since the start Mosthaf (2014) for Germany and by
of the great recession in the EU. Dolado el al. (2013) for Spain. This
Giuliano and Spilimbergo (2009) Macroeconomic conditions (through is due to changing labour demand
witnessing increased unemployment) have but also to the fact that during the
an effect on the young generation: young recession different educational groups
people who are aged between 17 and 25 compete for the same jobs and many
during a recession have less confidence in jobs requiring low skill levels are taken
public institutions and believe that success up by tertiary graduates (Bell and
depends more on luck than on effort. Blanchflower (2011)).
Causes of scarring effects: potential future employers seems to be For the United Kingdom, Gregg (2001)
signalling effects play a role given a rising explanatory power in the looked at cumulated experience of
and call for more efforts to literature. For instance, the substantial unemployment, highlighting how it
provide youths with a first effects of early-career unemployment is concentrated on a minority of the
employment experience quickly identified by Cockx and Picchio (2011) workforce over extended periods. It
are caused by ‘the negative signal that concludes that “low educational attain-
The two main channels of scarring prolonged unemployment conveys to ment, ability not captured by education,
effects of early-career unemployment potential recruiters’ rather than ‘depre- financial deprivation and behavioural
spells are associated with human capi- ciation of human capital’. The authors problems in childhood raise a person’s
tal (i.e. deterioration of skills or foregone conclude that “offering employment susceptibility to unemployment”.
work experience) on the one hand, and experience as quickly as possible is more
signalling effects (i.e. spells of unemploy - effective” than supply of training. As the context of unemployment spells
ment give a signal of low productivity to may differ greatly, scarring effects
potential employers) on the other. Other Doiron and Gørgens (2008), in the case vary across (education) groups both
-
explanatory factors include psycho- of young Australians with no post-in magnitude and by the underly
logical discouragement or habituation secondary education, point to the fact ing mechanism. Signalling effects (to
effects, theories of job matching where that the mere fact of being employed potential future employers) may play
the unemployed accept poorer quality matters (and conversely the mere fact a greater role for young people without
jobs and social work norms that influ- of being unemployed has a negative qualifications — while depreciation of
ence individuals’ preferences for work, impact). Ignoring these effects can lead human capital as well as foregone work
see Nilsen and Reiso (2011). In the case to underestimating the impact of labour experience could be relatively stronger
of young people, the signalling effect for market policies. for tertiary graduates ( 116 ).
116
( ) For instance, Brunner and Kuhn (2009)
reports that the labour market conditions
at entry have smaller and less persistent
effects on the earnings of blue-collar
workers than on those of white-collar
workers. This differential effect may be
explained by the wider wage distribution that
can be found among white-collar workers.
94
Table 7: Example of studies on scarring effects on other outcomes While over-education may also at some
point act as a strong negative signal to
Paper Main results employers, Baert and Verhaest (2014)
Bell and Blanchflower (2011) Young people's health status, well- provide evidence (based on a field
being and job satisfaction are experiment in Belgium with fictitious
impacted negatively through spells of job applications to real vacancies) of
unemployment, although the effects are a large stigma effect of unemploy-
less serious for 'older young people', i.e. ment than over-education and argue
those aged 23 or more. in favour of fast activation of unem-
Cutler et al (2014) Review of literature documenting that ployed youth.
cohorts graduating in bad times have
lower wages and poorer health for many Education protects
years after graduation, compared to those from scarring effects
graduating in good times.
Brenner (2013) Drawing on the 2000–10 period in In their review of existing studies
EU countries, the paper examines the in European countries, Scarpetta et
relationship between the unemployment al (2010) point out that ‘the lower
rate and Ischemic Heart Disease (IHD) the level of initial qualification, the
mortality rates and concludes that the longer the scarring effects are likely
unemployment rate has been an important to last’. This finding is confirmed by
risk factor for IHD mortality since the start Mosthaf (2014) for Germany and by
of the great recession in the EU. Dolado el al. (2013) for Spain. This
Giuliano and Spilimbergo (2009) Macroeconomic conditions (through is due to changing labour demand
witnessing increased unemployment) have but also to the fact that during the
an effect on the young generation: young recession different educational groups
people who are aged between 17 and 25 compete for the same jobs and many
during a recession have less confidence in jobs requiring low skill levels are taken
public institutions and believe that success up by tertiary graduates (Bell and
depends more on luck than on effort. Blanchflower (2011)).
Causes of scarring effects: potential future employers seems to be For the United Kingdom, Gregg (2001)
signalling effects play a role given a rising explanatory power in the looked at cumulated experience of
and call for more efforts to literature. For instance, the substantial unemployment, highlighting how it
provide youths with a first effects of early-career unemployment is concentrated on a minority of the
employment experience quickly identified by Cockx and Picchio (2011) workforce over extended periods. It
are caused by ‘the negative signal that concludes that “low educational attain-
The two main channels of scarring prolonged unemployment conveys to ment, ability not captured by education,
effects of early-career unemployment potential recruiters’ rather than ‘depre- financial deprivation and behavioural
spells are associated with human capi- ciation of human capital’. The authors problems in childhood raise a person’s
tal (i.e. deterioration of skills or foregone conclude that “offering employment susceptibility to unemployment”.
work experience) on the one hand, and experience as quickly as possible is more
signalling effects (i.e. spells of unemploy - effective” than supply of training. As the context of unemployment spells
ment give a signal of low productivity to may differ greatly, scarring effects
potential employers) on the other. Other Doiron and Gørgens (2008), in the case vary across (education) groups both
-
explanatory factors include psycho- of young Australians with no post-in magnitude and by the underly
logical discouragement or habituation secondary education, point to the fact ing mechanism. Signalling effects (to
effects, theories of job matching where that the mere fact of being employed potential future employers) may play
the unemployed accept poorer quality matters (and conversely the mere fact a greater role for young people without
jobs and social work norms that influ- of being unemployed has a negative qualifications — while depreciation of
ence individuals’ preferences for work, impact). Ignoring these effects can lead human capital as well as foregone work
see Nilsen and Reiso (2011). In the case to underestimating the impact of labour experience could be relatively stronger
of young people, the signalling effect for market policies. for tertiary graduates ( 116 ).
116
( ) For instance, Brunner and Kuhn (2009)
reports that the labour market conditions
at entry have smaller and less persistent
effects on the earnings of blue-collar
workers than on those of white-collar
workers. This differential effect may be
explained by the wider wage distribution that
can be found among white-collar workers.
94
